NZD/USD gains ground to near 0.5700 on weaker US PMI data

• NZD/USD posts modest gains around 0.5690 in Thursday's early Asian session. 
• US ISM Services PMI came in weaker-than-expected in January, declining to 52.8 vs. 54.3 expected.
• The RBNZ dovish bets and concerns about the US-China renewed trade war could undermine the China-proxy Kiwi.

The NZD/USD pair trades with mild gains around 0.5690 during the early Asian session on Thursday. The downbeat US economic data drag the Greenback lower against the New Zealand Dollar (NZD). Investors will closely watch the developments surrounding the renewed trade war between the United States and China, the world's two largest economies. 

The weaker US Services Purchasing Manager Index (PMI) could weigh on the Greenback and create a tailwind for the pair. The US ISM Services PMI eased to 52.8 in January from 54.0 (revised from 54.1) in December. This reading came in below the market consensus of 54.3.

On the other hand, the New Zealand employment data for the fourth quarter (Q4) will keep the RBNZ on track to cut the Official Cash Rate (OCR) by 50 basis points (bps) to 3.75% this month. Data released by Statistics New Zealand on Wednesday revealed that the country's Unemployment Rate rose to 5.1% in Q4 versus 4.8% prior. This figure registered a four-year high and was above the 25-year average of 4.8%. The rising bets that the Reserve Bank of New Zealand (RBNZ) will cut the interest rates might further weigh on the New Zealand Dollar (NZD).

"In line with RBNZ guidance, markets continue to imply another 50bps rate cut to 3.75% at the February 19 meeting and the policy rate to through around 3.00% over the next 12 months. Bottom line: NZ-US 2-year bond yield spreads can further weigh on NZD/USD," noted Société Générale's FX analysts. 

On Tuesday, China's finance ministry announced a package of tariffs on a range of US products, including crude oil, farm equipment, and some autos in an immediate response to a 10% tariff on Chinese imports announced by US President Donald Trump. Additionally, China put several companies, including Google, on notice for possible sanctions, in a measured response to Trump's tariffs. Any signs of uncertainty or escalating trade war tension could drag the China-proxy Kiwi lower as China is a major trading partner to New Zealand.